Showing papers on "Corporate group published in 2002"

Tunneling or Value Added? Evidence from Mergers by Korean Business Groups

Abstract: We examine whether firms belonging to Korean business groups ~chaebols! benefit from acquisitions they make or whether such acquisitions provide a way for controlling shareholders to increase their wealth by increasing the value of other group firms ~tunneling!. We find that when a chaebol-affiliated firm makes an acquisition, its stock price on average falls. While minority shareholders of a chaebolaffiliated firm making an acquisition lose, the controlling shareholder of that firm on average benefits because the acquisition enhances the value of other firms in the group. This evidence is consistent with the tunneling hypothesis. RECENT EMPIRICAL EVIDENCE SUGGESTS that business groups in developing countries can facilitate efficient allocation of capital and managerial resources. Khanna and Palepu ~1997, 2000! argue that business groups in developing countries mimic the beneficial functions of market mechanisms that are present only in advanced economies. When a particular market mechanism is not well developed or accessible, a business group can add value by providing member firms with alternative means of overcoming problems. For example, when a country’s external capital market is not well developed, the operation of an internal capital market within a business group enables those firms with the best projects within the group to obtain resources. 1 However, the structure of diversified business groups may create agency problems. In most business groups, ownership is highly concentrated, and

Wealth By Stealth: Corporate Crime, Corporate Law, and the Perversion of Democracy

Abstract: A scathing introduction to the operations of the modern corporation, written by a corporate lawyer. Outlines clearly how corporations become so powerful, also shows how they are able to act without regard to the behaviour and laws governing citzens and other groups.

The Adoption of Business-to-Business E-Commerce: Empirical Evidence for German Companies

Abstract: Although in its infancy, one promising application of Internet technology for firms is so-called Internet commerce or electronic commerce. This paper analyses the determinants of B2B (business-to-business) adoption borrowing from the literature on the adoption of new technologies and considering factors like firm size, corporate status, human capital and international competitive situation. An ordered probit model is applied to a data set containing about 3,000 enterprises from the German manufacturing industry and the German services sector in the year 2000. We find positive and significant effects of firm size, the share of highly qualified employees and the export share. An IT-intensive production process enhances the probability of a broad use of B2B e-commerce. An important influence on the use of B2B is the bandwagon effect, implying that firms are more likely to use this new Internet application if others within the same industry likewise do it. We find no significant effects of firm age and of the fact that a firm belongs to a group of companies as measures of a firm's flexibility and financial power.

Corporate Welfare, Corporate Citizenship, and the Question of Accountability

Abstract: Researchers in the business and society area have yet to address corporations that receive special government subsidies (a.k.a. corporate welfare). This article makes the argument that given their subsidized status, the citizenship of those companies warrants scrutiny, tests the common notion that large companies in particular industries derive the greatest benefit from corporate welfare, and determines what, if any, relationship corporate welfare has with corporate citizenship. Results show that large companies in particular industries are the most likely recipients of corporate welfare. In addition, corporations that receive corporate welfare demonstrate levels of corporate citizenship, which, after controlling for size, are not significantly different from companies that receive no such subsidies.

Developing Incentive Strategies for Implementation of Lean Construction

Abstract: This paper describes a methodology that has been developed by a group of Chilean construction companies to select employee and organizational incentives to encourage participation and commitment to the implementation of improvement actions in their organizations. These companies are carrying out joint efforts to implement lean practices that will lead them to gain improved competitiveness in their markets. The selection of incentives to introduce changes in an organization goes beyond the economic aspects and should address a full range of aspects and levels within the organization, involving upper and middle management, and workers. This paper focus mainly in the incentives for middle management, a level that has been found to be key for successful implementation of changes in the organizations. The methodology considers theoretical aspects as well as attitudes and perceptions obtained from each organization. The focus of the methodology is in identifying “drivers for change” at different levels: individuals, organizations and as a group of companies. As a result the methodology support the selection of incentives at each one of the levels addressed.

Corporate collapse, crime and governance - Enron, Andersen and beyond

Abstract: The corporate collapses of recent times, culminating with massive collapses such as those of Enron in the United States and HIH in Australia, have suggested to many that there are major systemic problems facing the way in which corporations and corporate governance operate Some conduct associated with these collapses has been clearly criminal in character, such as the actions of accounting firm Anderson in shredding audit related papers after a regulatory investigation into Enron had been announced The use of off-balance sheet structures by Enron so as to avoid adequate disclosure or transparency has also offended basic corporate governance notions Some conduct associated with the collapse of pivotal institutions such as these have led to the disqualification of directors and even to the virtual disappearance of one of the world’s great accounting firms Recent corporate collapses have also struck at the basis of investor and public confidence in previously highly regarded companies and professional firms and have led to calls for a reassessment of ethical standards, auditing practices, executive reward structures, governance practices and disclosure principles This article reviews some of the factors which have led us to this bleak juncture

Corporations Law in Australia

Abstract: Preface/ Acknowledgments The History of the Corporate Form and its Regulation Concepts and Perspectives The Legal Structure of the Corporations Legislation Interpretation and Review External Regulation Financial Reporting Audits and Auditors Types of Corporate Structure Constituting the Corporation Corporate Contracting Corporate Liability for Criminal and Civil Wrongs Corporate Governance: Structures and Issues Membership and Meetings The Duties and Responsibilities of Directors and Other Officers Members' Rights and Remedies Share Capital Debt Capital Managed Investments Fundraising Securities Regulation Takeover Regulation Reconstructions, Schemes of Arrangement and Deeds of Company Arrangement Receivers and Other Controllers of Corporate Property Winding Up and the Dissolution Process Liquidators and Creditors Table of Cases/ Table of Statutes/ Index

Corporate Killing as a Corporate Governance Issue

Abstract: In May 2000 the government proposed the introduction of a new offence of corporate killing founded on the concept of “management failure”. Two specific corporate risks are investigated; the risk that the company’s operations will kill one of its employees or a member of the public and the risk that the company will be convicted of an offence indicating corporate responsibility for that killing. The article demonstrates, firstly, that the risks associated with corporate killing fall within the ambit of the Turnbull Guidance. More importantly, it uses this particular, not directly financial, example to illustrate the proposition that Turnbull should not be associated with closure; rather it should be associated with the opening of a new level of corporate governance debate that will focus on corporate behaviour rather than corporate policy.

The Adoption of Business-to-Business E-Commerce: Empirical Evidence for German Companies

Abstract: Although in its infancy, one promising application of Internet technology for firms is so-called Internet commerce or electronic commerce. This paper analyses the determinants of B2B (business-to-business) adoption borrowing from the literature on the adoption of new technologies and considering factors like firm size, corporate status, human capital and international competitive situation. An ordered probit model is applied to a data set containing about 3,000 enterprises from the German manufacturing industry and the German services sector in the year 2000. We find positive and significant effects of firm size, the share of highly qualified employees and the export share. An IT-intensive production process enhances the probability of a broad use of B2B e-commerce. An important influence on the use of B2B is the bandwagon effect, implying that firms are more likely to use this new Internet application if others within the same industry likewise do it. We find no significant effects of firm age and of the fact that a firm belongs to a group of companies as measures of a firm's flexibility and financial power.

Financial Restructuring in Korea and Japan: Resolution of Non-Performing Loans and Reorganization of Financial Institutions

Abstract: South Korea and Japan responded to their financial crisis of the late 1990s by restructuring financial institutions. Also, financial authorities were created to supervise financial institutions and lead financial restructuring. Financial restructuring focused on the resolution of non-performing loans that had been contributing to financial failures and on strengthening their equity capital bases for sound management. Huge amounts of public funds were mobilized to pursue these policy goals. The Korean government took more drastic measures by closing or merging many failing financial institutions. Financial restructuring also facilitated bank concentration in Korea — and Japan — giving births to several mega banks. Both governments of Korea and Japan encouraged bank concentration by allowing the establishment of a financial holding company. The Korean government was more actively involved in merging banks while Japanese bank mergers were taken by business initiatives. Financial restructuring is expected to bring more market oriented business practices among financial institutions and loosen cooperative ties among financial institutions, corporations, and financial bureaucracy in both countries. Close bank-corporation ties through main bank system and corporate networks within a business group are being loosened in Japan particularly since concerned parties have come to seek market rationality over loyalty. On the other hand, the intervention in financial sector and the mediation in bank-corporation relationship by financial bureaucracy are expected to be weakened in the case of Korea. Nevertheless, discretionary power of Korea's financial bureaucracy appears stronger for the time being since it took the helmsman of determining which financial institution is out of market.

The reform of United Kingdom company law

Abstract: Part 1: The Company Law Review Part 2: Contemporary Company Issues Part 3: Corporate Governance and Accountability Part 4: Corporate Security and Insolvency Part 5: Financial Services and Markets.

Corporate Governance and Restructuring in Korea: Before and After the Crisis

Abstract: While the Korean economy had boasted a strong recovery with almost 10 per cent real growth in 1999, the situation in 2000 and now does not seem that bright. Now, the perception increasingly is that post-crisis restructuring, once regarded as successful, is not really satisfactory — only half the required job has been done. This chapter will look at the post-crisis changes in corporate governance and business structure in Korean firms. To evaluate post-crisis corporate restructuring in Korea, the chapter starts with examining the root of the corporate system in Korea.

The Impact of Conglomerate Firm Diversification on Corporate Performance: An Empirical Study in Taiwan

Abstract: In order to gain commercial advantage, numerous businesses have employed the strategy of conglomeratization to expand into these industries. The tendency toward the formation of conglomerates has become a trend of twentieth-century development. However, it is questionable that operational diversification can increase operating efficiency.' In light of this,for this study a two-stage method has been used to gain an understanding of the impact on the operational performance of Taiwanese business groups. The results show that the level of diversification is not related to companies.' profits, but that the inefficiency does display a negative and significant correlation with companies' profits. I. Introduction In pace with the trends of liberalization and internationalization, the development of business has entered into a new territory without national borders. Those enterprises that had previously relied upon the protection of government policy have gradually lost their competitive advantage in the face of opening markets. In order to raise competitiveness, sustain development, achieve economies of scope, pursue growth, and maintain a sound financial perspective, a large number of enterprises have engaged in mergers and acquisitions beyond their original markets. As a consequence, the tendency toward the formation of conglomerates has become a trend of twentieth-century development. Research on conglomeratization is quite abundant. On the whole, there is relatively more research focused upon the motives, strategic formations, and the outcomes of operations. In particular, there are already several scholars (Gort (1975)) who have carried out in-depth studies of the operation efficiency of diversification. However, to date there still has been no definitive conclusion on the topic. Predicated upon this view, this study a two-stage method has been used to gain an understanding of the impact on the operational performance of Taiwanese business groups. First, the stochastic frontier production function model developed by Battese and Coelli (1992) is used to estimate the inefficiency index for each company following business group development. The panel data regression estimation method is then used to estimate the impact of the level of diversification and inefficiency ratio on companies' profits. This study is divided into five sections: section one is introduction; section two is the literature review; section three is the establishment of a model for calculation; chapter four is the results of the empirical result; and chapter five is the conclusion. II. Literature Review To date, research on conglomerates has focused mainly upon the motive, strategic formation, and outcome of the diversification of business operations. In regards to the motive for the diversification of business operations, Amit & Livnet (1988), consolidating the research of numerous scholars, divide the motives for the diversification of business operations into synergistic motives and financial motives. Of the literature related to research on the strategic formation and outcome of diversification, the earliest work is by Rumelt (1974). Rumelt divides strategies for business diversification into four types (Single Business, Dominant Business, Related Business, and Unrelated Business), examining the relationship between strategies of diversification and their outcome. His results indicate both that Related Business diversified companies are superior to Single Business companies and that that Single Business companies are superior to Unrelated diversified industries and vertically integrated companies. Subsequent scholars have made use of Rumelt's classification of diversification strategies to engage in related research. For example, Grant & Thomas (1986). and Ramanujam & Varadarajan (1989). In recent years even more scholars have carried out penetrating studies on the operational outcome of diversification, although they exhibit a difference of opinion in their conclusions. …

La structure juridique des entreprises (corporate governance)

Abstract: Corporate governance as a normative concept appears to be directly linked to economic globalisation to the extent that it equally fits all internationally operating enterprises, that it is recommended by international institutions, and that it corresponds to the interests and responsibilities of international investors, in particular institutional investors interested in the primacy of « shareholder value ». The report analyses the meaning and the importance of the concept of corporate governance by examining, in a first part, the international spread of the principles of corporate governance, and, in a second part, the limits of the influence which the concept may exercise on the rules and practice of national corporate law. As regards, first, the international acceptance of the principles of corporate governance, a distinction is made between, on the one hand, the voluntary introduction of corporate governance, in particular by way of establishing professional standards and codes of conduct or by recommendation of public authorities or trade associations, and, on the other, by – mostly national rather than European – legislative action. In general, the latter only transforms existing or desirable « best practice » into legal rules, but, in some regard also takes legislative leadership, e.g. as regards the division of control within a corpora~tion or as regards transparency of remuneration of board members. Finally, principles of corporate governance may be imposed or enforced by regulatory action, in particular by the agency in charge of regulating the stock market or by the courts, when they rule on matters of corporate organisation or responsibility. Second, as regards the factors limiting general acceptance of the principles of corporate governance, they may be of an economic nature such as the high concentration of stock ownership on the Continent, or they may be of a political nature such as principled resistance to capitalist liberalism. In legal terms, however, the principal limitations are due to divergent national concepts of the role and function of enterprises in that they may combine in different ways shareholder interests with those of labor, e.g. by a variety of forms of codetermination, or with the protection of the environment or with other societal interests. In addition, principles of corporate governance are less easily accepted by corporations whose stocks are not listed at the stock exchange. In sum, therefore, corporate governance is a hallmark of globalisation with a considerable effect of harmonization and of enhancing the efficiency of corporate structures, but there is still and there will remain quite some diversity of rules and of conduct under the various national systems.

Democracy and Delaware: The Puzzle of Corporate Law

Abstract: Corporate law does not conform to ordinary democratic norms: unlike human citizens, corporations may choose the law that governs their most fundamental acts of self-governance. Most major American corporations chose the law of Delaware, with the result that the Delaware courts and legislature, under heavy influence of the Delaware and national corporate bar, organized in to professional organizations, and of the market pressure of corporate managerial decisions to reincorporate (or threaten to reincorporate), determines much of the corporate law in America. This system seems on its face to violate the most fundamental principle of popular sovereignty - all non-Delaware citizens of the United States are excluded from even formal participation in the process of determining American corporate law, and even Delaware citizens are reduced to a largely for malistic ratification role of results coerced, to a large extent, by the market for corporate control. Corporate law scholars have devoted many pages to debating whether the surrender of corporate law to a market for corporate reincorporation generates substantively good or bad results, but there has been virtually no discussion of whether this process can be squared with the American commitment to self-governance. This Article aims to address that latter issue - with its obvious implications for other areas in which we, consciously or unconsciously, chose to subordinate politics to markets or vice versa.

The globalisation of Russian energy companies: a way out of the financial crisis?

Abstract: This paper analyses the emergence of global energy companies in Russia. Within the framework of the history and rules of privatisation, the unfavourable investment climate, and the distortions of the internal Russian market, a dual structure of the Russian energy sector developed. Economic survival at present is strongly linked with internationalisation of business activities for one group of companies, while the second group of companies remains trapped in restructuring of assets and loans and reorganisation of ownership. The members of the first group are on their way to becoming Western style energy companies with strategies similar to those of their international counterparts. Case study evidence is provided on Lukoil, Gazprom and the power industry. The success of Russian global energy companies will have consequences for international competition, particularly in Eastern Europe and Russia.

How leaders of multi‐business groups add value

Abstract: Too often leaders of multi‐business groups struggle with how to best add value at this level of management. CEOs and business group leaders can improve the odds of success in these roles, and better retain potential successors, by answering three questions: Is there a clear business case for grouping these businesses? Given a clear business case, what are the most important roles the group executive should play? Given these roles, what are the key skills I should look for in each group executive? Drawing from interviews, existing literature, and their own extensive experience, the authors provide frameworks and perspectives that help top executives answer these questions.

The Benefits and Costs of Group Affiliation: Evidence from East Asia

Abstract: This Paper investigates the benefits and associated agency costs of using internal capital markets through affiliating with groups using data of two thousand firms from nine East Asian economies between 1994-96. We find that mature and slow-growing firms with ownership structures more likely to create agency problems gain more from group affiliation, while young and high-growth firms are more likely lose. Agency problems are important explanatory factors of firm value in economies outside Japan, but less so in Japan. Consistent with the literature, financially constrained firms benefit from group affiliation. Our results are robust to different time periods and estimation techniques.

An Agency Comparison of the Keiretsu and the Japanese Independent Firm

Abstract: INTRODUCTION Agency theory has been applied to the analysis of numerous organizational relationships and in various contexts. The concern of agency theory has been the conflicts that arise between agents and principals. When this theory is applied to the study of firms, this conflict becomes that between managers and the shareholders. Conflicts of interest are inherent in all contractual arrangements involving principals and agents. Whereas many of the studies of agency theory have focused on firms based in the United States, in this study we analyze a sample of Japanese firms. In our analysis, we question whether the Japanese keiretsu (or business group) experiences more agency conflict due to a lower shareholder orientation relative to a set of independent Japanese firms. We emphasize, however, that the contribution of our work is not the replication of previous findings. Although it may be beneficial to replicate agency-oriented North American studies in other environments, such efforts provide only limited insights. A comparative analysis of agency conflicts between keiretsu affiliated and independent Japanese firm has not been undertaken previously in the literature. A keiretsu represents a horizontally and vertically connected group of businesses with interlocking board members who are senior managers of member companies. Such an organizational structure allows the keiretsu companies to influence the behavior of the membership. Companies within the keiretsu can additionally exert influence because they have minority but significantly valuable mutual ownership in each other. Keiretsu members are also reciprocally impacted because they often engage in joint ventures with each other as well as signing multilateral purchase agreements. We speculate that lower levels of shareholder orientation and heightened agency problems in the keiretsu may emanate from a behavioral emphasis on the viability of the keiretsu community. Moreover, we emphasize that the concern of the community revolves around the protection of the weakest members of the business grouping. Whereas we presume that agency costs may arise from a collectivist predisposition in the keiretsu structure, we alternatively assume that agency conflicts may result from a self-serving motive in the Japanese independent firm. Consequently, as discussed subsequently, we contend that the Japanese independent firm does have the potential to be governed in the best interests of shareholders, but not the keiretsu company. For the purpose of this study, we contend that more security analysts may be enticed to follow firms that are shareholder oriented, with lesser potential for agency conflict. That is because the common stocks of such firms are easier to market to potential investors (Chung & Jo, 1996; Gross, 1982). Indeed, security analysts serve as facilitators in the marketing and sales of stocks to customers. Hence, "an important responsibility of security analysts who are employed by brokerage houses is to help their organizations generate transactions with customers" (Chung & Jo, 1996, 496). Buyers of common stocks would prefer that analysts follow those firms that are shareholder oriented, with lower agency costs, since as investors they will benefit from holding the securities of such high quality firms. Moreover, because analysts provide information on the activities of managers and forecast firm performance, they can also reduce information asymmetries that may exist between investors and corporate insiders (Chung & Jo, 1996; Ferris & Sarin, 2000). Thus, as more analysts follow a firm, more information is available about the company, reducing the ability of managers to exploit private information for self-gain. In this sense, analysts also serve as external monitors of management, encouraging those activities that force a greater convergence between managerial and shareholder interests. Hence, we use the extent of analyst following as a proxy for a shareholder-oriented firm with lower potential for agency costs. …

Corporate Groups and Strategic Alliances: New Reform Instruments to the Chinese

Abstract: The advent of corporate groups is the result of corporate development. A corporation can become a shareholder of other corporations by purchasing their shares. By the holding and cross-holding of shares, a number of companies connected together may form a corporate group. The controllers of the group may plan, instigate and co-ordinate its managerial, operational and financial activities on a group basis, while implementing these activities through individual group companies. In doing so, the corporation can enjoy the advantages of maximizing financial returns, limiting commercial risks and expanding markets. However, the practice adds new complexities to the already complicated corporate system, which stems from the fact that the fundamental norms and legal framework of the corporation had been built up prior to the emergence of corporate groups in the early-industrialized countries. As a result, the use of corporate groups inevitably brings certain contradictions and challenges to the well established corporate notions and practice. Since the 1970s, the People’s Republic of China has undertaken a great deal of effort to establish a network for enterprise cooperation for the purpose of enhancing the competitive ability of its enterprises. Various trials were carried out, including setting up various enterprise alliance, enterprise groups and corporate groups. China’s 1994 Company Law only addresses the terminology of parent companies and subsidiaries, but has no further provisions specific to corporate groups. The 1986 Civil Code does not contain a definition of corporate group, but only defines an enterprise alliance as a joint operation between enterprises or an enterprise and an institution. Such a joint operation may result in the establishment of a new legal entity or a partnership, or may be simply based on the cooperative contract. With the development of corporate practice, the patchy provisions relating to enterprise alliances in the 1986 Civil Code become less and less relevant. China urgently needs to develop an effective legal framework to guide the practice of corporate groups, because more and more state-owned enterprises are being corporatized and most newly established firms take the form of a company. This article will examine the theoretical challenges and difficulties brought by corporate groups in China.

Development Paths for Australian Biomedical Firms

Abstract: The purpose of this paper is to examine possible development paths for Australia's indigenous biomedical industry. The Australian biomedical industry has a number of components. It includes some of the R&D and other activities of the major foreign owned pharmaceutical companies. It also includes some of the activities of Australian owned pharmaceutical companies. However, in terms of the number of companies, the largest component consists of substantially Australian owned companies undertaking drug discovery and development for human purposes and a further group of companies developing supporting technologies and other associated products and services. The focus of this paper is on the latter group of Australian drug development and technology companies although the section on alliances encompasses the broader range of activities of pharmaceutical companies in Australia. With one or two exceptions the companies comprising the Australian industry are at an early stage of development. The development prospects of the total industry reduce to the choices made by these young companies on how they obtain the necessary resources and how successfully these resources are applied to transform their early stage product pipelines into marketable drugs and other products.

Innovation management in Finmeccanica: experiencing a technology matrix

Abstract: In analysing technology trends, economic theory highlighted the existence of a third factor, besides labour and capital, generally known as technological advance. Advantages in technology and innovation are provided by groups of firms mutually bound by equity alliances and operating under a common strategy and unique planning rules. Finmeccanica is an Italian Corporate Group operating in high technology manufacturing defence (16%;), energy (26%;), aerospace (25%;), automation (25%;), transport equipment (8%;). Different companies, globally oriented, are in charge of each sector reciprocal coordination to exploit technology opportunities and to benchmark competition is fundamental. A corporate technology planning was conceived to focus relevant technologies for proper development strategies and to promote technology transfer among different businesses. The main element of this process is a technology matrix, identifying 560 elementary technologies through group-wide sources of over 140 business areas. A yearly technology planning procedure allows for an accurate evaluation of RD the process is more important than its formal output, i.e., the plan; the value added of the corporate role must be recognised by the operative management; the process procedure is not a good per se but should be critically performed to be creative and innovative.